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Pass tax-law test for grads

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in Small Business Tax

Did your child just graduate from college or high school? This may be your last chance to grab a dependency exemption.

Strategy: Make sure you provide more than half of the child’s annual support. It doesn’t matter how much the child earns from a new job.

Generally, you can’t claim a dependency exemption if the person’s taxable income exceeds the annual personal exemption amount ($3,400 for 2007). But this test doesn’t apply to children under age 19 or full-time students under age 24.

Tip: A child is considered a full-time student if he or she attended school five months in the year, even if the months aren’t consecutive.

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